Cardano (ADA) declined on July 21, as increasing selling pressure around its fiercest resistance levels in 2022 arises due to the large planned hard fork.
ADA rate could fall by 20 percent by early August
The ADA price fell 5 percent to $ 0.476 over the day. This decline occurred a day after the short-term breakout above the 50-day EMA (red line on the chart) at $ 0.50.
The 50-day EMA has been acting as a resistance at ADA since October 2021.
ADA/USD Daily exchange rate. Source: TradingView
In addition, the resistance at the upper trend line of a wider descending channel strengthened the selling sentiment around the 50-day EMA. At the beginning of June, the same constellation of resistances triggered a 35 percent decline in the price in the direction of the lower trend line of the channel.
Therefore, there is a risk that a new correction at ADA will cause the rate to fall towards $ 0.384 by July or early August. That would represent a decline of about 20 percent from the price of July 21.
Fractal from 2018: ADA rate at $ 0.20
However, an analysis suggests that ADA could fall even lower than $0.384.
A bearish ADA forecast from TradingShot compares the ongoing correction with a correction from 2018, as you can see in the chart below.
ADA/USD-Daily exchange Rate 2022 versus 2018. Source: TradingView
In the above chart of 2018, you can see that ADA has gone through several declines near its 50-day EMA (orange line) and at the same time continued to trend downward in a descending channel. The downtrend of the token ended after a correction of almost 93 percent from its local peak.
“Looking at the 1D RSI, we also seem to be on the third (3) and last leg below the slump,” TradingShot said. In addition, it said:
“So if ADA owners want to avoid this, the price must break out above the 1D MA50 and stay above it for at least a week. Otherwise, it could happen that there will be a decrease of 93 percent to $ 0,200.”
When is the Hard Fork coming?
This latest ADA correction comes just days before the hard fork of Cardano.
The hard fork called “Vasil” was supposed to take place in June, but was postponed to the last week of July due to several bugs. Nevertheless, Input Output Hong Kong (IOHK), the company behind the Cardano blockchain, has not yet announced an exact date for the hard fork until July 21.
Vasil is expected to bring significant performance improvements to the Cardano blockchain. These include faster block generation and higher transaction speeds. The upgrade could boost ADA adoption due to improved network efficiency.
But Cardano has seen strong corrections in the past after most network upgrades. This is due to the principle of “buy the rumor, sell the news”, which has established itself in the market.
ADA/USD Three-day chart. Source: TradingView
During the Alonzo upgrade of the blockchain in September 2021, ADA increased by over 200 percent to a record high of 3.16 percent in the run-up to the launch. After the upgrade, however, Cardano fell over 85 percent.
ADA is up only 25 percent after the token hit its low point at 0.384 U.S. tolle on May 10. This suggests that Vasil has only moved the market a little.
But not everyone is convinced of this. Analyst Lark Davis, for example, believes that the token will break out strongly after the hard fork if it can hold the 50-day EMA as support.
#cardano $ada has broken past its 50 day EMA, now we just need Charles to announce the date of the Vasil hard fork and this puppy will rip! pic.twitter.com/yQTiCiCE6H
– Lark Davis (@TheCryptoLark) July 20, 2022
Until then, ADA will probably continue to be under a “sell the news” pressure. This is further exacerbated by the ongoing macroeconomic risks and their negative effects on the crypto markets.
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